Probability of Informed Trading? Some Evidences Around Corporate Events

The Probability of Informed Based Trading (PIN), built on a structural sequential trade model introduced in 1987 by Easley and O'Hara, has been increasingly used in empirical research in finance. However, up to now, its behavior around corporate events has not been really investigated (at our knowledge). We present in this work a first set of results around mergers and acquisitions on a sample of 141 operations that take place on Euronext Paris during the period 1995-2000. As our results are surprising (the PIN decreases before the event and increases after), we investigate the PIN by a simulation work in an attempt to a better understanding of its behavior. Results confirm that some concerns can be raised about the real capacity of the PIN to capture the presence of informed based trading, at least around major corporate events